What is a purchase order?

A purchase order is a formal document that outlines an agreement between a buyer and a seller regarding the purchase of goods or services. This document typically includes details such as the type and quantity of merchandise, pricing, delivery timelines, and payment terms. By providing these specifics, a purchase order ensures clarity and mutual understanding between the parties involved, thereby serving as a critical part of the procurement process.

The importance of a purchase order lies in its role as a legally binding agreement once accepted by the seller, which helps protect both the buyer and seller by defining expectations and responsibilities. It serves as a reference point throughout the transaction and can be used for record-keeping as well as in dispute resolution if necessary.